Rising oil prices and accelerating growth in vast swathes of the economy created a situation akin to a “tug of war”, prompting the Indian central bank to raise benchmark rates for the first time in more than four years, Asia’s richest banker Uday Kotak said Tuesday.

Kotak, who is the president-designate of the Confederation of Indian Industry (CII), defended the central bank’s move to harden rates by 25 basis points for the first time since the Narendra Modi government came to power.

“I can say as a banker that we are seeing very strong micro demand coming back -whether (be they) cars, trucks, two wheelers or farm equipment,” Kotak, who is also the chairman of Kotak Mahindra Bank, said Tuesday.

“The steel industry is going through its best period.” In contrast, Sunil Bharti Mittal, president of CII, said that increasing the rate at this juncture could lead to higher credit costs to the industry, but a good monsoon season and more efficient supply infrastructure may prompt the central bank to eventually return to a more benign rate cycle. Read More